New Policy Document on Investment-linked Business for Insurers and Takaful Operators

On 14 January 2019, Bank Negara Malaysia issued a Policy Document on Investment-linked Business.

The Policy Document applies to licensed insurers and licensed takaful operators which carry on investment-linked business, i.e. where part of the premium or contribution made by a consumer on an insurance policy or a takaful certificate is invested in investment-linked funds offered by the licensed person.

The objectives of the Policy Document are to-
  1. Promote and maintain high corporate governance and professionalism in the administration of investment-linked business;
  1. Ensure professional and proper conduct in the sales and marketing of investment-linked policies/takaful certificates;
  1. Enhance product transparency and disclosure to protect the interests of policy owners/takaful participants.

To achieve the aforesaid objectives, the Policy Document sets out requirements on-
  1. Approval to carry on investment-linked business;
  1. The management of investment-linked funds;
  1. Product design;
  1. Disclosure;
  1. Investment; and
  1. Valuation of assets and liabilities of investment-linked funds.

The Policy Document also includes-
  1. The requirement to implement minimum allocation rates (Paragraph 15 of the Policy Document);
  1. The introduction of standards for sustainability tests to ensure proper management of long term persistency of investment-linked policies/takaful certificates (Paragraph 16 of the Policy Document); and
  1. Enhancements to product illustration format (Appendices IV, IV(a) and IV(b).

The Policy Document is deemed to have come into effect on 11 January 2019 except for-
  1. The requirements on minimum allocation rates, which will be effective for licensed insurers from 1 July 2019 and licensed takaful operators from 1 July 2020;
  1. The requirements on management of sustainability cover and the new requirements on product illustration, which will be effective for licensed insurers and licensed takaful operators from 1 January 2020.

The documents stated in paragraph 7.1 of the Policy Document will be superseded from the dates set out in that paragraph.